Bill proposes more deregulation of commercial insurance (p. 2)

In our last post, we were talking about the “file and use” and “use and file” rate approval rules. Insurance companies in Florida may elect to use either, but the industry complains that the “use and file” rule is meaningless, because the Office of Insurance Regulation rarely approves the rate change. Insurers must then reimburse their policyholders for premiums collected at the proposed, but disapproved rate.

A law passed last year allows insurance companies to sell motor vehicle policies on fleets of 20 or more vehicles without obtaining regulatory approval. The law took the approval step out of the “use and file” rule.

Legislation making its way through the state Senate would extend the OIR approval exemption to smaller fleets (20 or less vehicles). Lawmakers didn’t stop at commercial motor vehicle insurance, though. The exemption would also be allowed for errors and omissions professional liability insurance, fiduciary and management insurance, general liability policies, non-residential property coverage, and multi-peril and excess property coverages. The new law would also cut down on the recordkeeping requirements: Companies would no longer have to hold on to underwriting files, premium records, and losses and expense statistics.

Senators favoring the bill say it would increase competition while being “more responsive” to the market and policyholders. Insurers will be able to respond quickly to market shifts, leading to more favorable rates for businesses, according to proponents.

Opponents point out that insurance companies would have the upper hand in dealings with customers. The ability to respond quickly could become a market quick-step around customers’ ability to negotiate. And, the deregulation could lead to rate hikes all over the state.

According to the OIR, the commercial insurance market is shifting, and rates will likely go up with or without the new law.